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CVS Health to acquire Aetna for $69 billion

The integrated payer and pharma company represents direct competition to providers as the new organization aims to offer lower-cost care.

Susan Morse, Managing Editor

On Sunday, CVS Health announced it was buying Aetna in a deal valued at $77 billion.

Aetna is valued at $69 billion. With the assumption of Aetna's debt, the total value is $77 billion.

The merger is slated to close during the second half of next year. It will undergo federal review.

[Also: Consumer benefit: The secret to getting an Aetna/CVS deal past regulators]

It would combine one of the top pharmaceutical companies and insurers in the nation.

Last year, the Department of Justice banned Aetna from merging with Humana for $37 billion.

The integrated payer and pharma company represents direct competition to providers as the new organization aims to offer lower-cost and more convenience access to care. It combines data and analytics to help prevent readmissions and to better manage chronic conditions.

[Also: CVS Health reportedly in talks to buy Aetna in a deal that would shake up the payer market]

It integrates Aetna's extensive network of providers with greater consumer access through CVS Health's 9,700 pharmacy locations and 1,100 MinuteClinic walk-in clinics.

CVS pharmacies in many locations will function as a community-based health hub, answering patient's questions about their health conditions, as well as prescription drugs and health coverage.

Many pharmacy locations will include space for wellness, clinical and pharmacy services, vision, hearing, nutrition, beauty, and medical equipment.

"This transaction redefines access to high-quality care in lower cost, local settings whether in the community, at home, or through digital tools," CVS said.

The deal also connects Omnicare's senior pharmacy solutions, Coram's infusion services, and the more than 4,000 CVS Health nursing professionals providing in-clinic and home-based care across the nation, CVS said.

"With the analytics of Aetna and CVS Health's human touch, we will create a healthcare platform built around individuals," CVS Health President and CEO Larry J. Merlo said. "We look forward to working with the talented people at Aetna to position the combined company as America's front door to quality healthcare, integrating more closely the work of doctors, pharmacists, other healthcare professionals and health benefits companies to create a platform that is easier to use and less expensive for consumers."

This is a natural evolution for both companies as they seek to put the consumer at the center of healthcare delivery, CVS Health said.

[Also: Aetna reports $381 million loss in first quarter due to failed Humana merger]

"Together with CVS Health, we will better understand our members' health goals, guide them through the health care system and help them achieve their best health," said Mark T. Bertolini, Aetna chairman and CEO.

CVS Health and Aetna will help consumers better manage the cost of the healthcare, especially for the 50 percent of Americans with chronic conditions that account for more than 80 percent of all healthcare costs.

The combination will help patients avoid unnecessary hospital readmissions through a complete review of their medications.

In this way, readmission rates can be cut in half, CVS said. Twenty percent of Medicare patients are readmitted to the hospital soon after being discharged.

In addition, home devices to monitor activity levels, pulse, and respiratory rates can be used to prevent readmissions.

Selected high risk patients discharged from the hospital, or their caregivers, will be able to stop at a CVS health hub location to access services such as medication evaluations, home monitoring and use of durable medical equipment, as needed. All of these services will complement and be integrated with the care provided by their physician and medical team.

The combined entity will be able to help address the growing cost of treating chronic diseases. For example, there are 30 million Americans suffering from diabetes, costing the healthcare system approximately $245 billion annually.

Patients with diabetes will receive care in-between doctor visits through face-to-face counseling at a store-based health hub and remote monitoring of key indicators such as blood glucose levels.

When needed, patients can receive text messages to let them know when their glucose levels deviate from normal ranges. As a follow up, patients can receive counseling on medication adherence, pick up diabetes-related supplies and engage ancillary services such as counsel on weight loss and programs designed to reverse diabetes through nutrition.

"These types of interventions are things that the traditional health care system could be doing," commented Merlo, "but the traditional healthcare system lacks the key elements of convenience and coordination that help to engage consumers in their health. That's what the combination of CVS Health and Aetna will deliver."

The transaction is expected to deliver $750 million in near-term synergies and a platform from which to accelerate growth, CVS said.

The combination over the longer term has the potential to deliver significant incremental value as it will spur the development of new products and generate significant new growth opportunities as a uniquely integrated retailer, pharmacy benefits manager and health plan, CVS said.

CVS Health will acquire all outstanding shares of Aetna for a combination of cash and stock. Aetna shareholders will receive $145 per share in cash.

Twitter: @SusanJMorse